ABFC-2014 March 5th, 2014 Samira Mensah Associate Director & Deputy Chair of S&P Global Focus Group on Islamic Finance Financial Services Ratings Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor s. Copyright 2013 by Standard & Poor s Financial Services LLC. All rights reserved.
An overview of Africa s Debt Markets: Sovereign issuances, Sukuk, Projects bonds Lack of Robust Market Infrastructure Investors Appetite Is Growing Sukuk Pipeline In Africa Sukuk Offer A Fresh Alternative To Fund Growth Sukuk Issuance In Africa Recent Initiatives Supporting Sukuk Issuance In Africa Appendix 2
Robust Market Infrastructure Is Lacking Legal and regulatory environments in many markets are still very weak and lack transparency. Transactions costs are among the highest in the world. Clearing and settlements not in line with international standards. Lack of liquidity (trading volumes, spreads, number of market participants, market makers).
Investors Appetite Is Growing Sovereign Eurobond Issues Country Amount ($ Mil.) Issue Date Maturity Date Issue Yield Comments Nigeria 500 28 Jan 2011 28 Jan 2021 7.00% Nigeria 500 12 Jul 2013 12 Jul 2018 5.38% Nigeria 500 12 Jul 2013 12 Jul 2023 6.63% Ghana 1,000 7 Aug 2013 7 Aug 2023 7.88% Ghana 750 10 Apr 2007 10 Apr 2017 8.50% The issue totaled $750 mil with maturity of 10 years and an offer was made to Ghana's first Eurobond to exchange into the new bond which resulted in the issue of an additional amount of up to $250 mil of the new bond, bringing the total of the new issue to $ 1 billion. Ghana s first Eurobond for which the above mentioned exchange offer was given. Kenya 2,000 Not yet issued Not yet issued - Despite market volatility and emerging market sale off in 2013, we expect the issuance to take place in 2014.
Sukuk Pipeline in Africa Sukuk Pipeline Status Issue Name Sukuk Name Country Currency Subsc. Date Issue Size ($ M) Margin Tenor Arranger/ Advisor Announced Banque Centrale de Tunisie Tunisia Sovereign Sukuk Tunisia TND 2014 631.1 - - - Rumoured Al Baraka Bank Egypt Al Baraka Egypt Bank Sukuk Egypt - 2014 150.0-10 Years - Rumoured FCB Capital First Community Bank Sukuk Kenya - 2014 - - - - Announced Central Bank of Nigeria Nigeria Sovereign Sukuk Nigeria - 2014 - - 5 Years to 7 Years CIMB Investment Bank Berhad, HSBC Bank Middle East Limited Rumoured Trans-Caledon Tunnel Authority Trans Caledon Sukuk South Africa - 2014 - - - - Rumoured Prime Investments International Group Limited Prime Investments Sukuk Egypt EGP 2014 - - - -
Sukuk Offer A Fresh Alternative To Fund Growth Access to a new investor base by diversifying fiscal funding sources. Cover external financing needs and support reserve building. Investors looking to diversify their exposure outside traditional markets like Asia and GCC region. Pay for multibillion-dollar worth of infrastructure work a year and to offset fiscal deficits. Sukuk offer long-term financing required for infrastructure projects.
Sukuk Offer A Fresh Alternative To Fund Growth: Sub Sahara Africa Current Account Balance (US$) (Mil) (US$) Nigeria Senegal Kenya Ghana South Africa 40,000 30,000 20,000 10,000 0 (10,000) (20,000) (30,000) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Standard & Poor's Ratings Services
Sukuk Offer A Fresh Alternative To Fund Growth: North Africa Current Account Balance (US$) (Bil) (Bil. $) 2 Tunisia(Republic of) Morocco(Kingdom of) Egypt(Arab republic of) 0 (2) (4) (6) (8) (10) (12) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Global Sukuk Issuance Sovereign vs. Private Issuers: 2003-2013 ($ billions) 160 Non-sovereign Sov. & Quasi-sov. 140 120 100 80 60 40 20 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Standard & Poor's and Zawya Sukuk Monitor Database. Note: Data shows sukuk issued in a given year, including sukuk that have already matured by yearend.
Sukuk Issuance In Africa Total Past Sukuk Issuances in the African Region ($ millions) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: Standard & Poor's and Zawya Sukuk Monitor Database. Note: Data shows sukuk issued in a given year, including closed and matured sukuk. 10
Geographic Breakdown of Sukuk Issuance Sukuk Issuances in the African Region as per Country ($ millions) 120.0 100.0 80.0 60.0 Sudan Nigeria Gambia 40.0 20.0 0.0 2007 2008 2009 2010 2011 2012 2013 Source: Standard & Poor's and Zawya Sukuk Monitor Database. Note: Data shows sukuk issued in a given year, including closed and matured sukuk.
Recent Initiatives Supporting African Sukuk Issuance The Capital Markets Authority of Kenya has recommended continuous allocation of a sukuk component in future bond issues targeting Islamic institutions and retail investors. Osun State in Nigeria issued a small sukuk ($62mil) but Nigeria has repeatedly expressed its interest in issuing sukuk. In 2011, the first banking license was granted to an Islamic financial institution. Multilateral institutions role and involvement with domestic regulators and regulatory initiatives support sukuk development. >>>>IDB provides technical and financial support to issuers and plans to establish a multi-billion program to help its members finance infrastructure.
Standard & Poor s Credentials in Islamic Finance
What we do in Islamic finance... Islamic finance coverage since mid 90s. First rating on a Re-Takaful company assigned in 1997 (BEST Re), Islamic Bank in 2000 (Al Rajhi Bank), & Sukuk in 2002 (Malaysia). 25 rated Islamic financial institutions (IFIs) and Takaful companies. About $52 billion of rated Sukuk (incl. programs). About 10 thought-leadership research articles published yearly (excl. rating reports on Islamic entities & sukuk). Islamic Finance book published every year. A team of around 30 professionals across all practices and all regions. 14
Our expertise is recognized 2014 The International Takaful Awards - Best Rating Agency 2013 Islamic Finance News - Best Islamic Rating Agency The Asset Triple A Award Islamic Finance - Best Rating Agency The International Takaful Awards - Best Rating Agency 2012 Islamic Finance News - Best Islamic Rating Agency The Asset Triple A Award Islamic Finance - Best Rating Agency The International Takaful Awards - Best Rating Agency 2011 Intelligent Insurer Awards - Global Best Rating Agency The Asset Triple A Award Islamic Finance - Best Rating Agency The International Takaful Awards - Best Rating Agency Reactions London Market Awards - Best Rating Agency 2010 The International Takaful Awards - Best Rating Agency 2009 The International Takaful Awards - Best Rating Agency 2008 The International Takaful Awards - Best Rating Agency 2007 Islamic Finance News - Best Islamic Rating Agency 15
Standard & Poor s: Useful Information
Our Islamic financial institutions ratings Issuer Credit Ratings -- Takafuls & Islamic Banks 17 Issuer Country Type Rating Al Baraka Banking Group B.S.C. Bahrain Bank BB+/Negative/B Al Baraka Turk Katilim Bankasi AS Turkey Bank BB/Negative/B Al Khaleej Takaful Group (unsolicited rating) Qatar Insurance BBBpi Al Rajhi Bank Saudi Arabia Bank A+/Stable/A-1 Al Sagr Cooperative Insurance Saudi Arabia Insurance BBB/Stable/-- BEST RE (L) Ltd Malaysia Insurance B+/Developing BEST RE Family (L) Ltd Malaysia Insurance B+/Developing Dubai Islamic Insurance & Reinsurance Co. (Aman) UAE Insurance BBB-/Stable/-- Hannover ReTakaful B.S.C. Bahrain Insurance A+/Stable/-- Islamic Development Bank Saudi Arabia Multinational AAA/Stable/A-1+ Jordan Islamic Bank Jordan Bank BB-/Negative/B Kuwait Finance House Kuwait Bank A-/Negative/A-2 Malath Cooperative Insurance & Reinsurance Co. Saudi Arabia Insurance BBB+/Stable/-- Mediterranean & Gulf Cooperative Insurance and Reinsurance Co. Saudi Arabia Insurance A-/Stable/-- Noor Takaful Family PJSC UAE Insurance BB+/Stable/-- Noor Takaful General UAE Insurance BB+/Stable/-- Qatar Islamic Bank (S.A.Q.) Qatar Bank A-/Stable/A-1 Salama/Islamic Arab Insurance Co. (P.S.C.) UAE Insurance BBB+/Negative/-- Saudi Re for Cooperative Reinsurance Saudi Arabia Insurance BBB+/Stable/-- Sharjah Islamic Bank UAE Bank BBB+/Stable/A-2 Takaful Re. Ltd UAE Insurance BBB/Stable/-- Tawuniya/The Company for Cooperative Insurance Saudi Arabia Insurance A/Stable/-- Wataniya Insurance Co. Saudi Arabia Insurance BBB/Stable/-- Weqaya Takaful Insurance & Reinsurance Co. Saudi Arabia Insurance BBB/Stable/-- Wethaq Takaful Insurance Co. K.S.C. (Closed) Kuwait Insurance BB/Stable/-- Source: Standard & Poor's Ratings Services. Note: Ratings as of Jan 31, 2013.
Our Outstanding Sukuk ratings Obligor Country Sukuk/Trust certificates Sector Date of Program Issued LT FC Regional Rating ($-eq Mn) ($-eq Mn) rating Scale Islamic Development Bank Saudi A. IDB Trust Services Ltd. Gov. Various 8,000 5,600 AAA -- Islamic Development Bank Saudi A. Tadamun Services Berhad Gov. 2008 333 133 AAA -- Emirate of Ras Al Khaimah UAE RAK Capital Gov. 2009 2,000 1,300 A -- Petroliam National Bhd. Malaysia PETRONAS Global Sukuk Ltd. Corp. 2009 -- 1500 A- axaaa Tourism Dev't and Inv't Co. UAE TDIC Sukuk Ltd Gov. 2009 1,450 1,000 AA -- General Electric USA GE Capital Sukuk Ltd. FI 2009 -- 500 AA+ -- Dar Al Arkan Real Est. Dvt. Co. Saudi A. Dar Al Arkan International Sukuk Co. II Corp./SF 2010 -- 450 B+ -- Government of Malaysia Malaysia 1Malaysia Sukuk Global Bhd. Gov. 2010 -- 1250 A- -- Central Bank of Bahrain Bahrain CBB International Sukuk Company (No 2) Gov. 2011 -- 750 BBB -- Republic of Indonesia Indonesia Perusahaan Penerbit SBSN Indonesia I Gov. 2011 -- 650 BB+ -- Emaar Properties PJSC [1st issue] UAE Emaar Sukuk Ltd. Corp./SF 2011 2,000 500 BB+ -- Government of Malaysia Malaysia Wakala Global Sukuk (series 1 and 2) Gov. 2011 -- 2000 A- -- Sharjah Islamic Bank UAE SIB Sukuk Co. II Ltd (Sharjah Islamic Bank) FI 2011 -- 400 BBB+ -- Republic of Indonesia Indonesia Perusahaan Penerbit SBSN Indonesia II Gov. 2011 -- 1000 BB+ -- Central Bank of Bahrain Bahrain CBB International Sukuk Company (No3) Gov. 2011 -- 750 BBB -- Abu Dhabi Commercial Bank UAE ADCB Islamic Finance (Cayman) Ltd Trust certificate FI 2011 -- 500 A -- Majid Al Futtaim Holding UAE MAF Sukuk Ltd. Corp. 2012 1,000 400 BBB -- Saudi Electric Co. Saudi A. Saudi Electricity Global Sukuk Co. (series 2) Corp. 2012 -- 500 AA- -- Saudi Electric Co. Saudi A. Saudi Electricity Global Sukuk Co. (series 1) Corp. 2012 -- 1,250 AA- -- Banque Saudi Fransi Saudi A. BSF Sukuk FI 2012 2000 750 A -- State of Qatar QAT SoQ Sukuk A (Qatar State) Gov. 2012 4,000 4,000 AA -- Emaar Properties PJSC [2nd issue] UAE Emaar Sukuk Ltd. Corp./SF 2012 2000 500 BB+ -- Development Bank of Kazakhstan KAZ Development Bank of Kazakhstan Program sukuk* Gov. 2012 475 79 BBB+ -- Axiata Group Bhd. Malaysia Axiata SPV2 Bhd Corp. 2012 1500 159 BBB- -- Republic of Indonesia Indonesia Perusahaan Penerbit SBSN Indonesia III Gov. 2012 3,000 1,000 BB+ -- Sime Darby Bhd. Malaysia Sime Darby Global Bhd. Corp. 2013 1500 800 A axaaa Sharjah Islamic Bank UAE SIB Sukuk Co. III Ltd. FI 2013 0 1,500 BBB+ -- Dubai Electricity Water Authority UAE DEWA Sukuk 2013 Ltd. Corp. 2013 0 1000 BBB -- Saudi Electric Co. Saudi A. Saudi Electricity Global SUKUK Co. 2 Corp. 2013 0 2,000 AA- -- Albraka Turk Katilim Bankasi AS Turkey ABT Sukuk Ltd. FI 2013 0 200 B -- IILM** Malaysia International Islamic Liquidity Management 2 SA's SF 2013 1,350 500 A-1 -- Dar Al Arkan Real Est. Dvt. Co. Saudi A. Dar Al Arkan Sukuk Co. Ltd Corp./SF 2013 0 750 B+ -- Aldar Properties PJSC UAE Sukuk Funding (No. 3) Ltd. Corp. 2013 0 750 BB -- Dubai Investment Park Dvt Co LLC UAE DIP Sukuk Ltd 2014 0 300 BB Source : RatingsDirect, as of Feb. 13, 2014.** International Islamic Liquidity Management Center 18
2013 2014 List of Articles Published on Islamic Finance (2013-2014) DATE Feb. 20 Feb. 17 ARTICLE TITLE How Standard & Poor's Rates Sharia-Compliant Insurance And Reinsurance Companies Islamic Finance Could Make Inroads Into North Africa Feb. 4 After A Mixed 2013, The Global Sukuk Market Looks Promising In 2014 Nov. 28 Islamic Finance 2014: We expect Continued Double-Digit Growth, And A Push For Regulation And Standards Nov. 27 Sukuk Issuance In The Corporate And Infrastructure Sector Should Remain Solid In 2014 Nov. 12 Turkey's Growing Islamic Banking Sector Needs Fresh Capital For An Added Push Oct, 1 Gulf Islamic Banks Continue To Grow Faster Than Their Conventional Peers, But Profitability Rates Are Converging Sept. 16 Qatar Islamic Banks Are On A Fast Track To Growth Sept. 11 Saudi Arabian Insurance in the third quarter of 2013: Will the Winners Take All? July 3 Competition And Overcapacity Are Harming The UAE Takaful Sector March 18 Insurance in Saudi Arabia in 2013: Grounds for Guarded Optimism Over Earnings March 11 Investor Appetite is Pushing Sukuk Into The Mainstream Feb. 13 Will African Sovereign Turn To Islamic Finance To Fund Growth? Full list (2002 to 2013) available in the Islamic Finance Outlook 2014 Edition, please see https://ratings.standardandpoors.com/economicresearch/europe-middle-east-and-africa/islamic-finance-outlook.html
Contact Information Mohamed Damak Director Paris +33 1 44 20 73 20 mohamed.damak@standardandpoors.com
Thank You Samira Mensah Associate Director & Deputy Chair of S&P Global Focus Group on Islamic Finance T: +27 11 214 1995 M: +27 78 423 2285 samira.mensah@standardandpoors.com Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor s. Copyright 2013 by Standard & Poor s Financial Services LLC. All rights reserved.
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